Reimbursing damages

[Margaret CPA in OH]

Contractor damaged a car with his truck on a job and, instead of reporting to insurance, reimbursed the car's owner for the repairs. This is a first for me. I'm not sure how to handle it. It's $1061 and makes a difference. I couldn't find anything on point is Pub. 535. Thanks for help!

[BobinNJ]

I don't think that this is a deductible expense. Akin to a traffic ticket. (Maybe not the best example)

[jainen]

>>Akin to a traffic ticket<<

Tickets are for violations of law. Contracting is an inherently dangerous business, but we expect the contractor to fix anything he breaks. Paying for accidental damage from utility trucks and other equipment is an ordinary and necessary operational expense.

[Margaret CPA in OH]

Thanks for the replies. I certainly was inclined to think it a legitimate expense in this business but don't know what sort of account to use. I do have a Truck/Auto Maintenance and Repairs but that is for the business trucks and car. Other suggestions? Thanks again!

[MAMalody]

I don't think I agree. It would appear to me that if you bypass an opportunity to have the damage paid for by a third party of which you are paying a premium for, that you surrender the ability to take the deduction. It is not usual, ordinary or necessary for any business to pay an expense they do not have to pay. It could be possible if you could document that you premium would go up as a result and it would be cheaper to pay it directly you may have a case.

[OldJack]

I agree with Jainen! It is simply a valid business decision as to not involving the insurance company. It is an ordinary and necessary business expense.